Nile Ltd. (Code:530129) Rs.73

Nile Ltd. was originally incorporated as a private limited company as Navabharat Industrial Linings and Equipment Pvt. Ltd. in 1984 and was later converted into a public limited company as Nile Ltd. (NIL) in 1994. NL has three main businesses viz. Glass Lining, Lead and Wind Energy. It is one of the leading manufacturers of Glass Lined Equipment, primarily used in pharmaceutical, specialty chemicals, agro chemicals and other similar industries. It has a technical collaboration with Hakko Sangyo Company Ltd., Japan and Comber of Italy. It also makes stainless steel glass-lined reactors, which meet some critical very-low-temperature applications. The lead and lead alloys are supplied to manufacturers of lead acid batteries, plastic stabilizers and metal oxides. The Wind energy generated is sold to Andhra Pradesh power Coordination committee.

NL manufacturing plant is located at Nacharam Industrial Estate, Hyderabad where it has totally integrated fabrication, machining and glass lining facilities. Recently, NL invested in augmenting its infrastructure and increased the installed capacity of the glass lining division from 12 lakh litres to 16 lakh litres. It has also been able to establish itself as a quality supplier of lead/ lead alloys, and has entered into long-term supply arrangements with Amara Raja Batteries apart from other customers in the plastic stabilizer business. Moreover, the company has now started focusing on export markets to boost its sales. Its wind farm is at Ramagiri and is generating power at a reasonable efficiency. The entire energy generated is sold to AP Power Coordination Committee at over Rs.3 per unit under a power purchase agreement.

Fundamentally, the company is quite strong and has a healthy growth track record. For FY06, its sales increased by 25% to Rs.57 cr. whereas PBT jumped 50% to Rs.3.55 cr. On a Net Profit basis, it recorded 35% gain to Rs.2.60 cr., which means an EPS of Rs.9. It declared Rs.3 as dividend, which works out to an yield of more than 4% at CMP. Although its margins are slightly under pressure due to the rising steel prices, still it is estimated to report a top-line of Rs.75 cr. and PAT of Rs.3.50 cr. for FY07. This will translate into an EPS of Rs.12 on its small equity of Rs.3 cr. This means that the scrip is available at a P/E ratio of around Rs.6. Notably, its competitor GMM Pfaudler is trading at much higher valuation. With its 52-week high/low at Rs.139/ Rs.63 and a good dividend yield, this scrip seems to have bottomed out at the current level and may start moving up anytime. Hereafter, investors are advised to buy, keeping a price target of around Rs.110 (50% return) in 15-18 months.

Hyderabad Industries - Rs.307

Established in 1946 and belonging to the CK Birla Group, Hyderabad Industries Ltd. (HIL) is the market leader with around 25% market share in domestic fibre and asbestos cement sheets which are used for roofing of industrial sheds, warehouses, poultry farms, houses of weaker sections and is the most cost effective roofing material available in the market. HIL is among the oldest players and enjoys strong goodwill for its well-known 'CHARMINAR’ brand. It also manufactures new generation building products like Aerocon Panels, an in-house developed/patented product and Autoclaved Aerated Concrete (AAC) blocks. Aerocon prefab panels are used as internal & external partitions, mezzanine flooring in construction of residential quarters, malls, shopping complexes and as a substitute for traditional brick walls. AAC block, a light-weight fly-ash based cement brick, is a substitute to traditional clay bricks and has numerous advantages particularly in multi-storied buildings due to their light-weight and thermal insulation properties. The company is also engaged in the business of Thermal Insulation Products (Refractories) and jointings.

HIL’s state-of-the-art manufacturing facilities are at located Faridabad & Daruhera (Haryana), Chennai (TN), Jasidih (Jharkhand), Wada (Maharashtra), Hyderabad & Vijayawada, Timmapur (A.P) and Jaunpur (UP). Notably, the company uses only the white asbestos (Chrysotile) in its product, which is far superior and safer than the other (blue and brown) types of asbestos. Due to the strong and rising demand, it has setup a greenfield sheet manufacturing plant at Sathariya Industrial Development Area in UP, which recently commenced commercial operation augmenting its total capacity to 6,52,000 TPA. This unit is HIL's first in UP and aims to cater to the UP, Bihar, Chhattisgarh, WB, MP and Nepal markets. Moreover, to cash on the ongoing boom, company is implementing a Rs.100-cr. expansion plan involving setting up of two fibre cement sheet plants each of 120,000 TPA capacity and one AAC block manufacturing facility. With this its capacity for sheeting will stand enhanced to about 9,00,000 TPA.

In the last fiscal, the company sold its loss-making heavy engineering division to Titagarh Wagons for a consideration of Rs.1 lakh as a going concern and also amalgamated the south-based group company Malabar Building Products to consolidate its operations. With construction activity expected to accelerate further in coming years, its AAC Blocks and Aerocon Panels have entered into a new era and has a huge potential. For FY06, its sales grew by 10% to Rs.450 cr. whereas net profit quadrupled to Rs.38 cr. registering an EPS of Rs.53. But due to not so good numbers for the June’06 quarter, its share price tumbled down sharply below Rs.300 from a high of Rs.620. However, due to increased capacity and better utilization, it is expected to close FY07 with turnover of Rs.525 cr. and PAT of Rs.45 cr., which translates into EPS of Rs.60 on its equity of Rs.7.50 cr. Hence investors are recommended to buy at current levels with a price target of Rs.450 (50% appreciation) in 12-15 months.

STOCK WATCH

To improve liquidity, Gemini Communication (Code:532318) (Rs.204.50) went for a stock- split by dividing its Rs.10 share into 2 shares of Rs.5 each. It is the first and only company in India engaged in the design and manufacture of RFid products with technology assistance from Texas Instruments. It has developed a range of off-the-shelf RFid solutions for various applications. For future growth, it is setting up a RFid manufacturing unit at Baddi in Himachal Pradesh at an investment of around Rs.20-22 cr. and may start the manufacture of RFid tags later in this calendar year. For the June’06 quarter, its total revenue increased by 35% to Rs.33 cr. whereas net profit zoomed 170% to Rs.2.81 cr. For FY07, it is expected to report a top-line of Rs.185 cr. and bottom-line of Rs.18 cr., which translates into EPS of Rs.18 on its diluted equity of Rs.4.88 cr. on the face value of Rs.5 per share. Applying a reasonable discounting of 14-18 times, this scrip could trade between Rs.260-320.

After hitting a high of Rs.200, PBA Infrastruture (Code:532676) (Rs.97.75) has corrected sharply and is currently trading around Rs.100. It is engaged in execution of civil engineering projects and specialises in construction of highways, dams, runways and heavy RCC structures, bridges and other infrastructure projects. Its clients include various government agencies viz. NHAI, CIDCO, MSSRDC Ltd, Airport Authority of India and PWDs of numerous State governments. It has a healthy order book of more than Rs.500 cr. For the June’06 quarter, it reported revenue of Rs.62 cr. with net profit of Rs.2.82 and declared Rs.1.50 as dividend for FY06. For FY07, it may clock a turnover of Rs.250 cr. and net profit of Rs.14 cr. leading to an EPS of Rs.10 on its current equity of 13.50 cr. If the market sentiment remains positive, this scrip can easily give Rs.25-30% return in 6-9 months.

When distilleries and liquor scrips are trading at rich valuations, GM Breweries (Code:507488) (Rs.112.40) is available for a song at a market cap of Rs.100 cr. It is the single largest manufacturer of country liquor in Maharashtra and enjoys virtual monopoly in the districts of Mumbai and Thane. With an installed capacity of more than 55 million litres of country liquor per annum, it is currently working at 75% capacity utilization. It has made a strong turnaround in FY06 and has moved ahead with excellent performance for June’06 quarter as well. Interestingly, it hasn’t diluted equity since its IPO in 1994 and has an uninterrupted record of dividend payment from the day of its listing. For FY07, it may report sales of Rs.185 cr. and net profit of Rs.14 cr. i.e. EPS of Rs.15 on its equity of Rs.9.36 cr. At a reasonable valuation, it should trade in the range of Rs.180-210. Investors are advised to buy as technically scrip has bottomed out and the risk of further downfall is negligible.

Once again small caps have started to move. Hence Hazoor Media (Code:532467) (Rs.14.12) is being recommended for risk-taking investors as the company is betting high on real estate projects. It has planned a real estate development project at an outlay of Rs.110 cr. near Amby Valley Citi. It is also in the process of identifying large track of land for developing Integrated Township project at Pune. As a business strategy, it is planning to enter into joint ventures with land owners and other established builders & developers who own the real estate properties at strategic locations. For FY06, its top-line grew by 15% to Rs.14 cr. and net profit grew marginally by 7% to Rs.4.50 cr. registering an EPS of Rs.5 on its equity of Rs.3.50, with face value of Rs.4 per share. If things pan out as planned, the company it will enter into a different league altogether. Scrip has the potential to test its high of Rs.23 in this calendar year itself.

Control Print (Code:522295) (Rs.63.90) is the undisputed market leader in the coding and marking machinery with a market share of around 40%. It has a product range of contact coders, superior touch coders, specialized metal marking systems, sophisticated ink jet coders and also advanced laser coders which can be used to print on any type of surface like plastic, glass bottle, paper, wood, steel etc. The scrip has corrected by more than 50% due to its not-so-encouraging numbers for the last two quarters. For the June’06 quarter, its sales improved by 5% to Rs.9.40 cr. whereas net profit declined marginally to Rs.1.96 cr. Despite this, for full year FY07, it may report sales of Rs.50 cr. and net profit of Rs.7 cr. which means an EPS of Rs.9 on its equity of Rs.7.40 cr. Being in such a fast growing sector, this scrip deserves much higher valuation and can give handsome returns if held for 18-24 months.